The decade-long NFL collective-bargaining agreement has another three seasons left, but in addition to the long-standing elements the NFL Players Association wants to see changed — from increasing its revenue share to limiting commissioner discipline — the players are pushing for changes to their commercial relationship with the league.
If the players stop granting all or some of their commercial rights to the league, it could have significant implications for how corporations do business with America’s top sport. Now companies such as Pepsi, for example, can cut a sponsorship with the NFL, negotiate directly with teams and the league for group player rights, and know the union will not sign a competitor to a deal.
“That commercial agreement is contingent on first and foremost that these rights belong to the players,” said DeMaurice Smith, the NFLPA executive director. “So, you enter into a commercial agreement when you decide that you want to take this right, this right, this right, give it to the league in exchange for money and you allow them to do a deal. … We might make decisions in the future that we want to pull back other categories and do them ourselves.”
The commercial agreement between the NFL and NFLPA is not in the CBA but negotiated as a side deal to the labor pact. Like the CBA, the commercial agreement is a decade long and expires at the same time in early 2021.
When the league signs a sponsorship or licensing arrangement, these companies are granted player group rights, defined as six or more players. The players get paid of course, but the companies need not go through the union. And the NFLPA cannot sign a competing deal: for example, Coca-Cola in the soft drink category.
War chest ready for battle?
If the NFL Players Association does go to “war” with the NFL in 2021, which is the term used by NFLPA Executive Director DeMaurice Smith at his annual Super Bowl news conference when asked about what will happen when the CBA expires in three seasons, it should have a sizable war chest.
The union reported a profit of $57.4 million for the year ending Feb. 28, 2017, according to the tax return the NFLPA filed with the IRS last month. This follows a profit (in tax return parlance it is called a surplus) of $30 million in the year earlier period.
Net assets, which are assets minus liabilities, rose to $355 million from $297 million in the most recent reporting period, according to the return. The biggest contributors to union revenue were player dues and royalties, as well as a $14 million investment gain (in the year earlier period the NFLPA lost $9.6 million on investments).
Among expenses, the highest-paid contractor was Hillard Heintze for background investigation services at $979,059. It is a rare instance when the NFLPA’s top paid contractor is not a law firm — though not by much. The NFLPA paid Winston & Strawn $961,740 (down from $5.7 million the year before); and Gibson & Dunn $752,903.
— Daniel Kaplan
In return the league pays the union. In the 12-month period ending Feb. 28, 2017, the NFL paid the union $61.5 million, 37 percent of the labor group’s commercial revenue, according to the NFLPA’s annual report filed with the Department of Labor last spring. It is easily the biggest revenue source for the union.
“There is value in having one-stop shopping where the NFL can sell group player rights,” said John Tatum, CEO of sports marketing firm Genesco Sports Enterprises. “It clearly will impact how much money sponsors will invest if they secure the rights from the NFL and have to make an additional payment to the union.
“It will decrease league value if a competitor can simply buy rights through the union,” Tatum added.
The NFL declined to comment.
Smith took issue with the suggestion the NFL pays the union handsomely for the rights, stating the rights belong to the players to begin with.
“It is intellectually dishonest to start off with the fact we get a big check,” he said. “The only reason that check is what it is, is it is rooted in the group licensing rights that we have.”
The NBA Players Association last year took their commercial rights back from the NBA, which had been paying the union about $68 million annually. The NBPA set up a business unit to handle the rights.
The NFLPA already has a for-profit business unit, NFL Players Inc., that handles marketing and licensing and has branched into media and startup funding. So, the NFL union presumably is ready to hit the ground running if tasked with more commercial inventory.
“I look at the NFL as a vendor, right, they don’t have the exclusive right to anything when it comes to our group licensing rights,” Smith said. “We make the decision about what categories of things we are going to give to them.”
At least the NFLPA can decide starting in 2021.